Sec 1031 property resale

[appelman]

When Sec. 1031 property is resold, is the purchase date taken to be the date of the exchange or the purchase date of the original property that was exchanged? I can't seem to find any discussion of this.

[Nashville]

Date of Exchange

Appelman, I can't think of any reason that the purchase date must be inherited just because the basis is inherited. There may be exceptions in cases of accession transfers, such as related parties, estates, trusts, etc.

If the traders are arms-length parties, I believe the date of the trade would prevail.

[appelman]

As it turns out...

It took some hunting, but:

26 USC § 1223 - Holding period of property

For purposes of this subtitle—
(1) In determining the period for which the taxpayer has held property received in an exchange, there shall be included the period for which he held the property exchanged if, under this chapter, the property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as the property exchanged, and, in the case of such exchanges after March 1, 1954, the property exchanged at the time of such exchange was a capital asset as defined in section 1221 or property described in section 1231. For purposes of this paragraph—
(A) an involuntary conversion described in section 1033 shall be considered an exchange of the property converted for the property acquired, and
(B) a distribution to which section 355 (or so much of section 356 as relates to section 355) applies shall be treated as an exchange.

(2) In determining the period for which the taxpayer has held property however acquired there shall be included the period for which such property was held by any other person, if under this chapter such property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as it would have in the hands of such other person.

[Roland Slugg]

The holding period of property received in a tax-free (§1031) exchange includes the holding period of the relinquished property. Code §1223(1). However, if additional funds are added to acquire the replacement property, then the holding period for that additional basis begins on the date of the exchange. In that case the replacement period will have two holding periods. This is consistent with the "two assets" concept whereby replacement property acquired in a T/F exchange is treated as two separate assets for depreciation purposes (unless an election is made to treat it differently).